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October 12, 2011

Transparency and Participation in Public Financial Management: What Do Budget Laws Say?

Posted by Paolo de Renzio, International Budget Partnership, and Verena Kroth, London School of Economics

An increasing number of governments, as well as international and civil society organizations, are promoting the public disclosure of budgetary information, and calling for greater citizen involvement in budget processes. Most agree that fiscal transparency generates significant benefits, as it is an important precondition for better governance, improved economic performance and prudent fiscal policy, resulting in lower deficits and debt accumulation. Moreover, transparency functions as a political expression of democratic governance, giving citizens and taxpayers information that they are entitled to, and that they can use to hold their governments accountable.

Given its increasing importance, how can transparency and participation in public financial management be promoted or improved? As a possible avenue, it is interesting to look at the role of legislation in promoting both disclosure of budgetary information and opportunities for citizen engagement in the budget process. Key questions then are: (a) to what extent does budget legislation in different countries cover issues related to budget transparency and participation, and in what level of detail? and (b) does the degree to which legislation covers issues related to public disclosure of budget information seem to affect the actual level of budget transparency in different countries?

In order to answer these questions, the International Budget Partnership gathered information on budget-related legislation across a sample of 125 countries,[1] covering different regions, levels of income and legal traditions.[2] The analysis is summarized in a Research Note, which highlights a number of interesting points:

More countries than expected include transparency clauses in their budget legislation. Overall, about half of the 125 countries surveyed incorporated some mention of budget transparency in their laws. In some cases, budget transparency was covered in laws promoting fiscal responsibility or access to information, rather than in public financial management legislation. Only a handful of countries cover issues related to citizen engagement and participation in budget processes, though the few examples that exist point to some interesting ways in which citizen involvement can be promoted.

Countries vary widely in the extent to which they provide detailed budget transparency provisions in their budget-related legislation. While some cite transparency merely as a principle, or stipulate the publication of a single budget document, others provide specific definitions of budget transparency, and detailed provisions on who should publish which budget documents, when, and through which means. In particular, 14 countries[3] have been identified as examples of very extensive coverage of budget transparency matters in their legislation.

No clear patterns emerged from the analysis of transparency and participation in budget laws. Countries with detailed clauses do not all belong to a particular region or income group, for example. Moreover, the inclusion of detailed transparency clauses in budget laws does not necessarily result in better practice, just as the lack of laws does not inhibit good practice. When measured through the Open Budget Index, countries with more advanced transparency provisions span the whole range of possible budget transparency scores.

Countries that perform well on budget transparency, and that do so without transparency laws, generally have a strong tradition of democracy and openness. In countries where such traditions do not exist or are incipient, however, new legislation can and does spur substantive reform efforts. Countries such as South Africa or Liberia have shown that legislation can be an effective driver for change and thus a useful tool to improve budget transparency. More generally, evidence shows that budget-related legislation in countries where budget transparency has improved the most over the past few years did include specific and detailed provisions on the public disclosure of budget information.

The analysis and the accompanying material available on the IBP website can be useful for civil society groups, governments and donor agencies engaged in efforts to improve budget transparency across the world. They provide ideas and suggestions on how other countries might capture not only the principle of budget transparency, but also the more detailed provisions that can turn it into a more tangible result, including the provision of opportunities for citizen participation and engagement in the budget process. This will be particularly relevant in countries that are considering reforms in their budget legislation, or where civil society organizations are struggling to gain adequate access to budget information.

[2] Generally speaking, budget-related legislation refers to laws, bills and acts that govern the management of public finances, and may go under different names in different countries. In some cases, the analysis was complemented by reviews of so-called Fiscal Responsibility legislation, and of laws regulating public access to information.

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